California is Robbing the Poor to Pay Thurston Howell III

[courtesy of California Progress Report]

By Assemblymember Dave Jones

I recently saw an advertisement for a yacht that looked really nice. The yacht’s name said it all. “No Worries” was a true beauty, 44 feet long. But a $300,000 boat isn’t in the family budget.

Nor is it for most Californians. Especially not the state’s working poor, who struggle to pay for essentials like rent, food, utilities, and child care.

The California Budget Project estimates that for a two-parent family it takes $72,343 per year to meet basic expenses. California has about two million working families that make less than half that income.

So I was obviously frustrated last year when, while the state’s gloomy fiscal situation forced the Legislature to freeze important services to poor and middle-class families, some of my Republican colleagues in the State Senate insisted that the State Budget continue a tax break for yacht buyers. And they held up the budget for an extra month to do so.

This year, I thought, things would be different, mostly because our budget shortfall was projected at more than $14 billion over the next 18 months. Surely the egregious yacht tax loophole would be closed – that should be one of the easiest fiscal decisions of the year. Governor Schwarzenegger proposed doing so in his initial budget proposal in January, an encouraging sign.

So in late February the Legislature did the fiscally responsible thing and made a number of painful mid-year budget cuts that, when coupled with other cost-cutting moves, shaved our projected budget shortfall down to around $8 billion, still large but representing sound progress.

However, in doing so my Republican colleagues in the State Assembly decided that while they were prepared to cut education funding and health care for the poor, they just couldn’t stomach closing the yacht tax loophole. Too painful, apparently, to the Thurston Howell IIIs of the world. So they refused to provide the 2/3 vote necessary to close the yacht tax loophole. In doing so they robbed the poor to help subsidize tax avoidance by rich yacht owners. Are those the values we want reflected in our state budget? Those aren’t my values, that’s for sure.

The yacht tax loophole works like this. If you buy a yacht three miles offshore and keep it outside of the state for 90 days before bringing it back in, you can escape paying sales or use tax on the purchase. Just sail southward and choose one of the many “90-day yacht clubs” available in Ensenada, Mexico, then stash the boat there.